PCCW, I-Cable Win Broadcast Television Licenses in Hong Kong

PCCW will next discuss the proposed license conditions with the government and the Communications Authority, according to a Hong Kong stock exchange filing yesterday. Photographer: Jerome Favre/Bloomberg

Oct. 16 (Bloomberg) -- PCCW Ltd., controlled by billionaire
Richard Li, and I-Cable Communications Ltd. won initial approval
to compete in Hong Kong’s free-to-air television market after
new permits were given for the first time in almost 40 years.

I-Cable shares more than doubled to a record in Hong Kong
as of the city’s midday break, while PCCW jumped 8.9 percent.
Hong Kong Television Network Ltd., which said today it will cut
320 jobs after its permit application was rejected, plunged 31
percent following a 28 percent jump yesterday.

PCCW and I-Cable join Television Broadcasts Ltd. and Asia
Television Ltd., the only broadcast television providers in Hong
Kong since 1978. Advertisers spent an estimated HK$13 billion
($1.7 billion) in Hong Kong in 2012, with television accounting
for about a third of that, Bank of America Corp.’s Merrill Lynch
unit said in a February report, citing Magna Global.

“We estimate new operators could launch the free-to-air TV
services within 6-12 months and new competition could start as
early as 2014,” Mandy Chan, an analyst at Merrill Lynch, wrote
in a report. “We expect TVB to face challenges in keeping its
near monopolistic hold of the Hong Kong free-to-air TV market.”

Shares of I-Cable surged 164 percent to HK$1.24, the
highest level since its trading debut in November 1999. PCCW
advanced to HK$3.79, while Hong Kong Television Network plunged
31 percent to HK$2.13. Television Broadcasts added 0.1 percent
to HK$48.70.

More Choices

The awards to I-Cable’s Fantastic Television Ltd. and
PCCW’s HK Television Entertainment Co. will double the number of
free-to-air TV operators and bring in more investment, Commerce
Secretary Gregory So said yesterday.

“This will not only provide more program choices for the
audience, but also create more job opportunities in the creative
industries,” So said at yesterday’s briefing.

Television Broadcasts’ flagship channel has a 93 percent
audience share during prime time on weekdays, according to the
company’s 2012 interim report.

I-Cable, a unit of Wharf Holdings Ltd., will invest more
than HK$1 billion in the first six years of its proposed
television service and PCCW will spend more than HK$600 million
in the initial three years of operation, So said.

PCCW will next discuss the proposed license conditions with
the government and the Communications Authority, according to a
Hong Kong stock exchange filing yesterday. I-Cable, in an
exchange statement, said its application had received the
government’s approval in principle.

Final Approval

The companies plan to operate one channel each within 12
months, with a second channel within 24 months, according to the
proposals submitted to the government.

The granting of the two licenses needs final approval, and
the government doesn’t preclude handing out more permits in the
future, So said. Hong Kong last granted a new license in 1975 to
Commercial Television Ltd., which ceased operations after three
years.

Asia Television opposes the government’s decision on
granting the new television licenses, the broadcaster said in an
e-mailed statement yesterday. It doesn’t rule out “further
actions,” the company said, without being more specific.

Hong Kong Television had invested more than HK$900 million
before yesterday’s decision, Chairman Ricky Wong told reporters
today. The company didn’t understand why its application was
rejected and it’s seeking legal advice, Wong said.